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Stocks staged a healthy rally last week and prices rose more than 1%, without the typical crutches of positive news from Europe or additional easing announcements by the Federal Reserve.

Instead, a week's worth of relatively good U.S. economic news pushed stocks higher, from a surprising drop in unemployment to better-than-expected factory and nonmanufacturing data.

Nevertheless, Friday's poor market action damped the mood at week's end. The Standard & Poor's 500 index turned from a strong morning rise to a lower close for the day.

With the third-quarter earnings season opening shortly, near-term market confidence likely isn't helped by such a reversal. More specifically, the lack of participation in the rally by a bellwether stock such as Apple (ticker: AAPL), which fell 2% last week, could weigh on investors this week, particularly if earnings reports aren't up to snuff.

The Dow Jones industrial average picked up 1.3% last week, or 173 points, to 13,610.15, a new 52-week high and 4% below its all-time high of 14,164.53 hit October 9, 2007. The S&P 500 gained 1.4%, or 20.26, to 1460.93. Friday, however, it finished slightly lower after being up 0.65% early in the day. It's up 16% year-to-date. The Nasdaq Composite added 20 points or 0.6% last week, to 3136.19.

There were better economic data, and the market feels like it wants to move higher, notes Quincy Krosby, a Prudential Financial market strategist, but then a crucial stock like Apple pulls back. When leading stocks do that, even when accompanied by a little bit better economic news, then "you start to see sentiment weaken."

It could be nothing more than a consolidation phase before earnings reports, she adds, but the tug of war goes on between those who fear the global economic slowdown and those who say the global monetary-easing stimulus will support stock prices until a sustainable economic recovery begins.

It does seem as if the market looks tired. For example, last week, the S&P index again attempted to move beyond the 1470-1475 level and, as was the case a few times last month, wasn't able to hold it. Combine that with the weakness in Apple and other leading tech stocks over the past month, and the market looks like it's ready to soften.

Friday, the Labor Department said the U.S. unemployment rate dropped to 7.8% in September, the lowest level since President Barack Obama took office. Payrolls rose, too.

Following the news, the market blogosphere was stirred up by an accusatory tweet from Jack Welch, former CEO at General Electric (GE). He wrote on Twitter: "Unbelievable jobs numbers…these Chicago guys will do anything…can't debate so change numbers.''

That underperformance derives from market disenchantment with results for the June-ended fiscal third quarter. Johnson Controls (ticker: JCI), which makes auto interiors, car batteries, and commercial-building control systems for heating, ventilation, and air conditioning (HVAC), traded as high as $36 early this year.

In that third quarter, sales rose just 2%, to $10.6 billion, though net income increased 17%, to $417 million, or 61 cents per share, from 52 cents. Over the nine months, EPS rose to $1.73 from $1.58.

Despite the profit rise, investors are wary of slowing sales growth and more important, the company's reduced guidance, due to softness in its global markets and expectations of a lower euro. JCI slashed its fourth-quarter earnings-per-share forecast to flat to up 5%, from a 25% rise, suggesting that it will report net of $2.50 a share for its fiscal 2012 year, ended last month.

Johnson Controls was hurt by soft demand for aftermarket batteries, Europe's economic woes in general, and record-high prices for battery cores, which are recycled into new batteries. The battery problem, the company said, isn't expected to last past the fourth quarter. Still, such negative news shouldn't be completely ignored. The macro-economic environment has gotten tougher for a global company like JCI and could remain that way for a while.

Yet one quarter does not a company make, especially a cyclical one with a consistent history of revenue and earnings gains. When the market throws a tantrum and sells such a stock down to valuations that are pretty low compared with the historical norm, investors should sit up and take notice.

The company missed EPS forecasts by just a few pennies and is suffering from cyclical problems, not a huge break in its business, argues Tom Weary, chief investment officer of Lau Associates, a family-wealth manager in Greenville, Del. "This is a great long-term business that had a temporary setback. It will come back," he predicts. Lau has been buying JCI shares.

JCI is big in the emerging markets, so China's slowdown will hurt. However, the U.S. auto-interiors market, roughly 50% of sales, should bubble along as the light-vehicle market continues to show signs of strength, Weary says. And commercial HVAC, about a third of the business, showed strong profit growth of 28%, on improved margins, despite only a small revenue rise.

The stock has fallen to a valuation that might tempt long-term investors, Weary asserts. JCI fetches 9.5 times consensus earnings expectations of $2.91 a share in fiscal 2013, sharply below its median forward historical P/E of 13. Weary puts fair value closer to $36, about 30% above the current level.

Since fiscal 2001, Johnson Controls has consistently boosted revenue and earnings, except during 2009's global financial crisis and recession. It sports a dividend yield of 2.6%, and net debt is 33% of total capital. Johnson Controls looks dented not broken. For a patient investor, that spells opportunity.

"NO FISHY AFTERTASTE." That's part of the promotion for MegaRed, a leading Omega-3 fatty-acid supplement made by
Schiff Nutrition International
(SHF). It's one of the Salt Lake City firm's most important branded products. Omega-3s are thought to help prevent heart disease.

After a 128% rise in Schiff shares this year, to $24.40, the valuation seems higher than the fundamentals justify.

The advance has been fueled by a couple of acquisitions, primarily that of Airborne, bought for $150 million on March 30. And it comes as Schiff's reliance on the production of private-label vitamins and supplements has dropped to 14% of total sales from 20%-30%. That business is low-margin and highly competitive, and the products can compete with Schiff's own brands.

In the company's first fiscal quarter, ended Aug. 31—the first complete period with Airborne included—net sales jumped 46%, to $85.1 million, while earnings rose to $6 million, or 20 cents a share, from $4.7 million, or 16 cents, the company reported on Sept. 18. That day, Schiff also inched up its revenue-growth guidance for fiscal 2013 to 43%-46% from 40%-43%, and the stock jumped 17%. A prime driver of the revenue gain was the inclusion of Airborne, which sells dietary supplements aimed at making users less susceptible to colds or other ailments, especially on airplanes.

However, a look at Schiff's 10Q filing, should make investors think twice about extrapolating the first-quarter growth spurt past August 2013, when Airborne's impact on growth will be lapped.

For example, the company notes in the 10Q that in the year-earlier quarter, net sales on a pro forma basis—that is, as if Airborne were included in that period's results—would have been $74.3 million. So the recent quarter's sales rise would have been just 15%, not 46%. Fifteen percent is good, but not great. Again pro forma, because of one-time acquisition costs, the latest quarter's profit would be lower than in the year-earlier quarter. With Airborne included, net would have been $7 million, or 24 cents a share, in the 2011 stretch.

What will happen, beginning next fall, if Schiff doesn't come up with another Airborne? Growth—while potentially still robust—could be materially weaker than now anticipated by the stock's valuation.

Schiff's rich valuation might be acceptable with a sustainable 45% sales growth rate, but not for one of 15% or less. The company's track record isn't particularly stellar. For the past four years, earnings have been stuck around 50 cents to 60 cents per share. Return on equity has averaged 12.4% since 2006; operating margins, about 10.4%—again good, but not great.

In an interview Friday, Schiff's CEO and president, Tarang Amin, citing company policy, wouldn't go beyond the fiscal 2013 guidance and say whether 40%-plus annual sales gains are sustainable. He did say that he is confident about Schiff's prospects, which will include acquisitions. Even after Airborne has been in the fold for a year, good execution will drive strong growth, he contends, noting that MegaRed has penetrated just 1.5% of U.S. households.

To justify its lofty stock price, Schiff must grow strongly and sustainably. Some investors doubt that it can. To them, Schiff's valuation smells fishy.